Maryland's ground rent reform faces a keytest in federal court today as the state seeks todismiss a case filed by dozens of the largestholders.
U.S. District Judge Andre M. Davis is expectedto hear arguments that the overhaul effectivelyseized their properties, causing financialharm deserving of compensation thatcould exceed $400 million.
Since July 1,when the last of several reformsbecame law, holders have had to file suit toput a lien on the property to recover debts. Beforethat, they could file ejectment lawsuits toobtain money or the property, a process thatis still unfolding in cases filed through lastJune 30.
In some of those cases, Baltimore homeownerscontinue to lose their houses or pay steepfees to keep them. Yet, the holders complainthat it's harder than ever to get paid and thatthe fees judges have been awarding no longercover costs.
The lawsuit alleges that the new laws renderground rent leases worthless by making it toocostly and cumbersome for their holders tocollect rent or seize houses if rents aren't paid.
"They've been put in a very tough position,because they don't have a real remedy to collectthe rent," said Edward J. Meehan, an attorneywith Skadden, Arps, Slate, Meagher &Flom LLP, who is representing the plaintiffs.
"There was an old system that had a very reliableremedy."
Maryland Attorney General Douglas F. Gansler has said he is confidentthat the reformswill be upheld.
About 400 cases filed under theold laws were pending in BaltimoreCircuit Court. In the pastfew months, at least three Baltimorehouses have changed handsover unpaid ground rent of a fewhundred dollars, court recordsshow. Ground rent holders inthose cases resold the homes for$15,000 to $30,000 each, accordingto the documents.
In some cases where the holdersobtained fees instead of properties,they have found the courtless generous in approving feesdemanded in the ejectment suits.
A court master reduced a feethat attorney Jay A. Dackmanwas being charged by another attorneyover a ground rent at arowhouse in East Baltimore frommore than $4,000 to $1,500, anoutcome that would have beenunlikely in the past, Dackmansaid.
"The court no longer has thetemperament for the abusive feesas it did before the legislaturechanged the ground rent laws,"Dackman said.
Last year, the General Assemblyresponded to a series in The Sunby reforming the state's centuries-old system, under which anestimated 150,000 to 200,000Marylanders pay rent on the landunder their houses.
The December 2006 seriesshowed that a small number ofinvestors had seized hundreds ofhomes over back rents as small as$24. At times, ground rent ownersextracted fees of 20 to 50 timesthe rent owed.
"As a result of all the press coverageand the action by the GeneralAssembly, most judges wouldhave seen that and would be sensitiveto the issue and try to bringa fair result about," said BaltimoreCircuit Judge Albert J.Matricciani Jr.
Some ground rent holdersrushed to filed ejectments underthe old law. They filed 154 on thelast day, amounting to 300 lawsuitsin June.
Ayanna Sanders found herselfthe defendant in one of thosecases. The 23-year-old, whobought her Broening Manor rowhousewhen she was 18 with cashfrom a lead paint settlement,went to court on Valentine's Day.A ground rent owner was threateningto take her house over justunder $300 in overdue groundrent.
City Circuit Judge Stuart R.Berger slashed the fees that Sandershad to pay to keep her propertyin the 1600 block of Malvern St.
Saying that ground rent is confusing,he noted that Sanders hadtried to respond out of court.
"This matter could have andshould have been resolved beforeit got to this point," Berger said.
Berger said that Lee Barnstein,who is registered agent for plaintiffLee & Joyce Inc., had failed toprove that he was entitled to allthe fees he had requested.
Barnstein's itemized bill for Sandersto redeem the property wasfor $2,004--or $1,210 higher thanthe judge said hewould allow.The court had been provided nospecific documentation for timespent to justify expenses otherthan Barnstein's description ofthe work involved, which includedstanding in line at the Pikesvillepost office, driving to Baltimoreand finding a parking placeand searching for a deed, Bergersaid.
"This court must decide whetherthe plaintiff has proved he's entitledto that money," Berger said."Without documentation, thecourt is unwilling to awardthem."
Barnstein and companies forwhich he, or a family member, isthe registered agent filed at least79 lawsuits in Baltimore City and
Baltimore County on June 28 and29, court records show. In each, hedemanded $500 in attorney fees.The judge awarded him $200 inthe Sanders case.
In the past, judges seldom hadrequired documentation or reducedthe fees that ground rentowners sought in their court filingsfor ejectment, based on interviewsand a reviewof hundreds ofcourt files by The Sun.
Barnstein, who operatesGround Rents LLC, said he wasconcerned about the precedent ofa judge reducing the fees sought.
"I'm paying like three or fourtimes what I'm able to collect," hesaid in an interview. "It's just notfair. If we wouldn't have filed thatcase, we would never have collectedthat ground rent."
About 30 of the cases Barnsteinfiled are pending, said J. ScottMorse, an attorney representingBarnstein. The balance have beenpaid off, he said.
Barnstein said he and otherground rent owners are uncertainhowto recoup their money.
"Nobody knows how to collectanymore," he said. "You can't justsit back and write letters and begthem to pay. And we have delinquentground rents galore."
Alvin and Hilda Fisher of
Owings Mills have a dozen groundrents that they purchased morethan 20 years ago.
"It's amazing to me how peopleavoid paying ground rent," AlvinFisher said. "It becomes completelyexasperating. When we firstbought those ground rents over20 years ago, they would get paidby the owners."
Fisher said he thought that publicityabout ground rent wouldmake homeowners more accountable."I thought when theygot that bill, money would beforthcoming. But it didn't happen."
The couple said they never hadtaken anyone to court. "We sufferin silence," he said.
One of the lawmakers who ledthe overhaul of ground rent lawsaid he is happy that the onlycalls he receives these days aboutground rent are an occasionalquestion about how to redeemthem.
"The abuse that took placedrove that legislation," said Sen.
George W. Della Jr., one of thechampions of ground rent andtax sale reform. "If owners ofground rent are inconveniencedby the legislation, then so be it."
Sun reporter Fred Schultecontributed to this article.